[ T H O U G H T L E A D E R S H I P | S & P G L O B A L ]
UNLOCKING THE FUTURE:
Transforming custody account opening through technology
The process of custody account opening has long been a cumbersome and inefficient experience, crying out for automation and technological intervention. Hardly a tale that’ s unique in the securities services world of course, but one that’ s perhaps been less under the spotlight than others. Lengthy timelines, repetitive document submissions and inconsistent standards have plagued custodians, sub-custodians and their clients for some time. However, as technological advancements continue to reshape financial services, a paradigm shift is occurring, with automation and digitisation paving the way for greater efficiency and improved client experiences. A recent Global Custodian roundtable discussion brought together industry leaders to explore the challenges of custody account opening and identify the key solutions that will drive transformation. The discussion highlighted the pressing need for innovation and collaboration in modernising account opening processes.
The challenges David McNally, global head of product management for securities services at Deutsche Bank, set the stage by outlining the fundamental challenges faced in custody account opening, emphasising the multifaceted nature of the issue.“ It’ s an entire web of complexity – regulatory, operational, and technological hurdles that slow things down, frustrate clients, and increase costs for everyone,” he said. One of the primary obstacles is regulatory fragmentation. Each market has its own compliance requirements, documentation standards, and oversight mechanisms, making account opening an arduous
A panel of experts recently gathered for a Global Custodian roundtable to discuss the main challenges in custody account opening and highlight how new technologies, behavioural changes and industry collaboration can help transform the process.
exercise in navigating a labyrinth of rules. Regulations such as KYC / AML, FATCA, and local tax laws add layers of scrutiny, turning what was once an administrative function into a full-scale regulatory undertaking. A prime example of this complexity is the Designated Depository Participant( DDP) framework in India, which places custodians at the forefront of investor onboarding, requiring them to ensure regulatory compliance before an account can even be opened. Adding to these difficulties is the reliance on manual processes. Paper forms, wet signatures, and disparate data formats create inefficiencies that prolong onboarding timelines and introduce operational risk. As McNally noted:“ Every time a document needs to be scanned, verified, or re-entered, the risk of human error increases.” This lack of standardisation across markets and institutions further complicates automation efforts and stymies scalability.
An industry in need of standardisation Suren Sankar, managing director, global custody, State Street, underscored the interconnected nature of these challenges, explaining how different stakeholders- including buy-side firms, global custodians, and sub-custodians- face similar pain points.“ What’ s interesting is that all of these pain points are interconnected,” he noted.“ The bifurcated processes across custodians and sub-custodians create duplicative efforts, leading to inefficiencies and increased costs.” One of the most significant contributors to delays in account opening is the sheer volume of required documentation. The manual verification of thousands of pages of legal agreements, corporate documents, and tax forms results in protracted onboarding timelines. State Street, for instance, processes over 300,000 documents annually, with multiple touchpoints for review.“ If every document is reviewed manually, the inefficiencies multiply,” Sankar added.“ We need to move toward a data-led process where documents are structured and leveraged efficiently.”
Why has change been slow? Despite widespread recognition of these issues, the pace of change has been slow. According to Oliver Maxwell, head of global regulatory & document solutions at S & P Global Market Intelligence, this is due in part to legacy infrastructure, which limits institutions’ ability to integrate new solutions seamlessly. Additionally, financial institutions, particularly custodians, have traditionally been conservative, prioritising compliance over innovation.“ The weight of regulatory risk has historically stifled innovation,” he noted.“ Firms have been hesitant to disrupt existing processes due
44 Global Custodian Spring 2025